This $26.5 Billion Listing Ranks Behind Only SpaceX in U.S. Market History

Space Exploration Technologies, popularly known as SpaceX, created history last month when it went public by raising $75 billion, making it the largest initial public offering (IPO) ever.

SpaceX overtook energy and chemicals giant Saudi Aramco, which raised $25.6 billion during its IPO in 2019. However, it didn't take long for Aramco to slip by one spot with the U.S. listing of South Korean semiconductor giant SK Hynix (NASDAQ: SKHY) this month.

SK Hynix raised $26.5 billion, and its shares jumped 13% during the company's Nasdaq debut on July 10. Let's see what the company plans to do with the proceeds from its share sale and check whether you should buy this semiconductor stock by examining its prospects and valuation.

Image source: The Motley Fool.

SK Hynix needs money to build new fabrication facilities

SK Hynix is the second-largest memory manufacturer in the world after Samsung. Its market share of dynamic random-access memory (DRAM) was 29% in Q1. SK Hynix also controlled 18% of the global NAND flash market in the first quarter, according to Counterpoint Research. What's more, it is the largest player in the high-bandwidth memory (HBM) market with a 58% share.

These market share numbers explain why SK Hynix needs to aggressively expand its fabrication capacity to fill the memory supply gap. The company predicts that the overwhelming demand for memory chips won't stop anytime soon. SK Hynix CEO Kwak Noh-Jung recently told Reuters that the supply crunch will worsen in 2027. He also added that memory demand will continue to exceed SK Hynix's production capacity into the next decade.

Not surprisingly, SK Hynix is going all out to build additional capacity to meet end-market demand. The company aims to double its wafer production capacity over the next five years. As a result, it intends to invest more than $700 billion over the long run to boost its manufacturing capabilities in South Korea. The proceeds from its U.S. listing will be used to support its expansion plans.

Specifically, SK Hynix intends to use the $26.5 billion raised from its U.S. IPO to construct a new fab and build a new packaging facility in South Korea. It will also purchase advanced extreme ultraviolet (EUV) lithography machines to manufacture cutting-edge chips. These investments are necessary considering that the global memory market's revenue is projected to increase from $225 billion in 2025 to a whopping $1.28 trillion in 2027, according to market research firm TrendForce.

SK Hynix is in a terrific position to capitalize on this opportunity due to its strong market share and its ambitious expansion plan to address the severe memory shortage. All this makes this semiconductor stock a no-brainer buy right now, given its attractive valuation.

The valuation makes this chip giant a must-buy

SK Hynix's stock has been volatile in its short life as a U.S.-listed company. However, investors will do well to consider the bigger picture. It trades at just 25.7 times trailing earnings, and the forward earnings multiple of 9 is even more attractive.

The valuation makes it clear that investors are getting a terrific deal on a company whose revenue shot up by 198% year over year in the last reported quarter, and earnings jumped nearly 400%. Moreover, the exponential growth in the memory market should enable SK Hynix to maintain its remarkable momentum, especially as it moves aggressively to capture the trillion-plus-dollar revenue opportunity.

Consensus estimates indicate that its growth trajectory will get better this year, with its 2026 earnings per share estimated to increase by a phenomenal 428%. Given that SK Hynix is trading well below Nasdaq Composite's average earnings multiple of 40, now is a great time to buy this growth stock before it steps on the gas and goes on a bull run.

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.